Liabilities and Stockholders Equity Exam Practice

1. Jackie took up a​ 30-year mortgage loan years ago and have since been making monthly payment of    The mortgage interest rate is  ​(APR). She noticed lower interest rate and plans to refinance. How much did Jackie borrow on the​ 30-year ​% APR​ mortgage? How much does she owe on the mortgage​ today? ​(Note: Be careful not to round any intermediate stepsveless than six decimal​ places.)

 

 

 

 

 

 

2.      Assets	2006	2005	Liabilities and ​Stockholders’ Equity	2006	2005
Current Assets			Current Liabilities
Cash	60.8	58.5	Accounts payable	85.6	73.5
Accounts receivable	55.1	39.6	Notes payable​ / ​short-term debt	9.8	9.6
Inventories	45.4	42.9	Current maturities of ​long-term debt	39.6	36.9
Other current assets	5.9	3.0	Other current liabilities	6.0	12.0
Total current assets	167.2	144.0	Total current liabilities	141	132.0
​Long-Term Assets			​Long-Term Liabilities
Land	65.3	62.1	​ Long-term debt	238.9	168.9
Buildings	109.8	91.5	Capital lease obligations
Equipment	120.3	99.6
Less accumulated depreciation	​(57.4​)	​(52.5)	Deferred taxes	22.8	22.2
Net​ property, plant, and equipment	238	200.7	Other​ long-term liabilities	−−−	−−−
Goodwill	60.0	−−	Total​ long-term liabilities	261.7	191.1
Other​ long-term assets	63.0	42.0	Total liabilities	402.7	323.1
Total​ long-term assets	361	242.7	​Stockholders’ Equity	125.5	63.6
Total Assets	528.2	386.7	Total liabilities and ​Stockholders’ Equity	528.2	386.7

Refer to the balance sheet above. If in 2006 Luther has 10.2 million shares outstanding and these shares are trading at​ $16 per​ share, then what is​ Luther’s enterprise​ value?

A.

−$547.00

million

B.

$781.40

million

C.

$390.70

million

D.

$528.20

million

 

 

 

 

A graphic designer needs a laptop for​ audio/video editing, and notices that they can elect to pay

$2,700

for a Dell XPS​ laptop, or lease from the manufacturer for monthly payments of

$78

each for four years. The designer can borrow at an interest rate of

14​%

APR compounded monthly. What is the cost of leasing the laptop over buying it​ outright?

 

 

 

 

A graphic designer needs a laptop for​ audio/video editing, and notices that they can elect to pay

$2,700

for a Dell XPS​ laptop, or lease from the manufacturer for monthly payments of

$78

each for four years. The designer can borrow at an interest rate of

14​%

APR compounded monthly. What is the cost of leasing the laptop over buying it​ outright?

 

 

 

You are borrowing money to buy a car. If you can make payments of

$310

per month starting one month from now at an interest rate of

12​%,

how much will you be able to borrow for the car today if you finance the amount over

5

​years?

 

 

 

 

 

A pottery factory purchases a continuous belt conveyor kiln for

$47,000.

A

8.1​%

APR loan with monthly payments is taken out to purchase the kiln. If the monthly payments are

$451.87​,

over what term is this loan being​ paid?

 

 

 

 

 

Assets	2006	2005	Liabilities and ​Stockholders’ Equity	2006	2005
Current Assets			Current Liabilities
Cash	61.3	58.5	Accounts payable	86.7	73.5
Accounts receivable	55.7	39.6	Notes payable​ / short−term debt	9.1	9.6
Inventories	46.4	42.9	Current maturities of long−term debt	37.2	36.9
Other current assets	5.1	3.0	Other current liabilities	6.0	12.0
Total current assets	168.5	144.0	Total current liabilities	139	132.0
Long−Term Assets			Long−Term Liabilities
Land	65.4	62.1	Long−term debt	238.3	168.9
Buildings	107.9	91.5	Capital lease obligations
Equipment	118.4	99.6
Less accumulated depreciation	​(57.6​)	​(52.5)	Deferred taxes	22.8	22.2
Net​ property, plant, and equipment	234.1	200.7	Other long−term liabilities	−−−	−−−
Goodwill	60.0	−−	Total long−term liabilities	261.1	191.1
Other long−term assets	63.0	42.0	Total liabilities	400.1	323.1
Total long−term assets	357.1	242.7	​Stockholders’ Equity	125.5	63.6
Total Assets	525.6	386.7	Total liabilities and ​Stockholders’ Equity	525.6	386.7

Refer to the balance sheet above. ​ Luther’s current ratio for 2006 is closest​ to:

 

 

 

1. 82
2. 42
3. 61
4. 21

 

 

 

 

You are thinking about investing in a mine that will produce

$10,000

worth of ore in the first year. As the ore closest to the surface is removed it will become more difficult to extract the ore. ​ Therefore, the value of the ore that you mine will decline at a rate of

8​%

per year forever. If the appropriate interest rate is

3​%,

then the value of this mining operation is closest​ to:

 

 

 

 

Assets	2006	2005	Liabilities and ​Stockholders’ Equity	2006	2005
Current Assets			Current Liabilities
Cash	58.1	58.5	Accounts payable	85	73.5
Accounts receivable	54.3	39.6	Notes payable​ / short−term debt	10.5	9.6
Inventories	46.7	42.9	Current maturities of long−term debt	37.6	36.9
Other current assets	6.1	3.0	Other current liabilities	6.0	12.0
Total current assets	165.2	144.0	Total current liabilities	139.1	132.0
Long−Term Assets			Long−Term Liabilities
Land	66.2	62.1	Long−term debt	236.8	168.9
Buildings	107.7	91.5	Capital lease obligations
Equipment	117.8	99.6
Less accumulated depreciation	​(55.4​)	​(52.5)	Deferred taxes	22.8	22.2
Net​ property, plant, and equipment	236.3	200.7	Other long−term liabilities	−−	−−
Goodwill	60.0	−−	Total long−term liabilities	259.6	191.1
Other long−term assets	63.0	42.0	Total liabilities	398.7	323.1
Total long−term assets	359.3	242.7	​Stockholders’ Equity	125.8	63.6
Total Assets	524.5	386.7	Total liabilities and ​Stockholders’ Equity	524.5	386.7

Refer to the balance sheet above. What is​ Luther’s net working capital in​ 2006?

 

 

 

.

$26.10

million

B.

$304.30

million

C.

$52.20

million

D.

$13.10

million

 

 

 

Jackie and Joe have just had their first baby and they wish to insure that enough money will be available to pay for their​ daughter’s college education. Assume that the educational savings account will return a constant APR of

5​%.

They had initial savings of

​$7389

deposited into the account right away​ (on the day the child was​ born) and plan to make further deposits into the educational savings account on each of their​ daughter’s birthdays, starting with her first birthday and ending on her

18th

birthday. They have a savings goal in the amount of

​$92498

will be needed for college by their​ daughter’s

18th

birthday.

1. If the couple is to make an equal deposit into the account every year​ (annual compounding​ interest), how much do they need to deposit to reach the savings goal in the amount of

​$92498

in

18

​years?

The couple need to deposit

​$nothing

to reach their savings goal in the amount of

​$92498

in

18

years.​ (Enter dollar and cents​ amount, for​ example, enter​ $20.06 as​ 20.06, ignore the​ +/- sign)

1. If the couple does not have any initial savings and still plans to accomplish the same savings goal in the amount of

​$92498in

18

years by making an equal deposit into the account every year​ (annual compounding​ interest), how much do they need to deposit to reach the savings goal in the amount of

​$92498

in

18

​years?

The couple need to deposit

​$nothing

to reach their savings goal in the amount of

​$92498

in

18

years. ​(Enter dollar and cents​ amount, for​ example, enter​ $20.06 as​ 20.06, ignore the​ +/- sign)

1. If the couple accomplishes the goal in the amount of

​$92498

by their​ daughter’s 18th​ birthday, what is the maximum their daughter can withdraw from the account every year over the 4 years she will be in college if she withdraws an equal amount each​ year? Assume the interest rate remains

5​%

APR and the annual withdrawal occurs at the end of each year after she enters college.

The​ daughter’s maximum annual withdrawal is

​$nothing​(Enter

dollar and cents​ amount, for​ example, enter​ $20.06 as​ 20.06, ignore the​ +/- sign)

 

 

 

 

 

Maple is very happy that her investment in a​ neighbor’s business is going to result in cash inflows over the next three​ years:

She will be receiving

$46,199

at the end of this​ year,

$92,398

at the end of next​ year, and

$138,597

at the end of the year after that​ (three years from​ today). The interest rate is

13.1%

per year.

1. What is the present value of​ Maple’s cash​ inflows?
2. What is the future value of​ Maple’s cash flows in three years​ (on the date of the last​ payment)